Industry will be invited to bid to take over employment services under radical proposals unveiled by Work and Pensions Secretary James Purnell in Birmingham on Wednesday.

The welfare system is to be opened to offers from the private and voluntary sectors, in a drive to cut unemployment in areas where it has proved most stubborn.

The aim is to find innovative new ways of getting the long-term unemployed and people on incapacity benefit into work.

Birmingham currently has the most severe pockets of unemployment in Britain, according to a House of Commons report which examined jobless numbers in each constituency.

Ladywood currently has the highest unemployment rate of any constituency in the country, with 6,779 claiming Jobseekers Allowance - 18.4 per cent of the eligible population.

The constituency with the second highest unemployment rate is Sparkbrook & Small Heath, with 5,165 people out of work, or 13.5 per cent.And a Birmingham constituency is also in third place. Hodge Hill has 3,229 unemployed, a rate of 11.4 per cent. Constituencies in Liverpool and Manchester have the fourth and fifth worst unemployment rates.

Speaking at the International Convention Centre, Mr Purnell said benefit claimants would be allowed to choose between going to either a public, private or voluntary-run job centre in their area.

Under the current rules, Mr Purnell’s department decides which services to put out to tender. However, the reforms announced by the Work and Pensions Secretary mean will that contractors will now be encouraged to come up with proposals for the services they want to run under a so-called “right to bid”.

Organisations supplying employment services will be forced to compete, with jobseekers given a choice as to which service to use.

Mr Purnell said: “Claimants should have the choice over how to get back to work, not whether they should go back to work.

“We want a work culture, not a welfare culture and we can only achieve this by reforming the system so that it demands personal responsibility.”

He claimed that his department was an excellent example of how public, private and voluntary groups can work together, but he wanted to go further.

“Where providers identify a part of our business, or a customer group that they think they could do more for in a particular region, I want to hear their proposals. I want to be able to harness this creativity, and test the ideas we receive so that we can develop the innovative ideas for future programmes or enhance the effectiveness of current ones to do yet more to help people back into work.

“This is not an ideological issue - it’s not one at the expense of the other. We are no more in favour of private providers than the public sector. It’s a pragmatic question about the best way to help people.

“Rather than identify a need and then invite suppliers to fill it, we’d like to have an open door, where good ideas get serious consideration.

“One of the strengths of providers is the potential to develop new solutions to existing problems and we should put ourselves into the position to tap into this expertise and innovation more creatively.”

Mr Purnell will announce that an extra £5 million will be given to cities which are pioneering back-to-work schemes.

The announcement was welcomed by business leaders on Wednesday.

Neil Bentley, the CBI’s director of public services, said: “We welcome the Government’s moves to give the voluntary and private sectors a much bigger role in getting people back to work.“Specialist welfare providers have an excellent track record, especially with those hardest-to-reach individuals whom Jobcentre Plus is much less successful in helping.“The £12.5 billion incapacity benefit bill is not sustainable and all efforts must be made to cut this.”